It’s SMEs against retailers in US too | business | Hindustan Times
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It’s SMEs against retailers in US too

business Updated: Dec 04, 2011 22:24 IST
Yashwant Raj

India is not the only country that is chary of allowing big retailers to set up shop. California, homeland for big box retail giants such as Walmart, is seeing a petition that urges the state’s governor to sign into law a bill to protect small and medium business.

The bill only gives citizens the right to decide if they want these giants in their community, but it speaks volumes for their uneasy existence in their country of birth.

This bill has already been passed by the local House, and big retail is a dispute that has raged here for decades.

The impact of big retailers in some US areas has indeed been devastating. Walmart Watch, an anti-Walmart organisation, claimed in 2005 that the chain’s expansion in Iowa shut down 555 grocery stores, 298 hardware stores, 293 building suppliers, 161 variety stores, 158 women’s stores and 116 pharmacies.

However, a West Virginia university study showed in 2008 that while these stores did indeed shut down, many more opened up instead creating more jobs and business.

The process is called “creative destruction”. Every innovation has that impact on technologies and processes it overtakes. The giants are just another stage in retail evolution.

In India’s case, these giants will serve an entirely different purpose, says Tusk business school’s Vijay Govindarajan, who was recently named among the world’s top business thinkers. India needs to create jobs, millions of them.

And that can only be accomplished by a strong manufacturing sector, which in turn depends on a strong distribution network.

“By bringing global competition into the distribution sector, we would have taken an important step to grow India as a manufacturing power house,” Govindarajan said. “Sure, this would create negative consequences for mom and pop corner shops in India. That is not a reason to resist progress.”

But going into India, and, more importantly staying on, is unlikely to be easy for these retailers. “People in the US travel miles to these outlets that are mostly in the suburbs but traveling in India is neither convenient nor economical,” said Valerie Demont, who teaches a business course on India at the Columbia law school.

“It would be a serious mistake if Walmart and Tesco bring their big box retailing to India,” said Govindarajan. India is relatively poor; customers cannot buy in bulk and inventory the products at home.

“It is imperative that the global retailers think of more convenient small store formats,” said Govindarajan.

That is already being tried by these retailers in populated areas of the US. But India is likely to be a completely different ball game. Absolutely.